Do you want to make higher returns on your stock trades? Using a leveraged ETF can boost your returns, but they are also more risky for investors. Here’s some advice about leveraged ETFs:
Disclaimer (see our disclaimer page): Seek professional advice before investing.
An ETF (exchange-traded fund) is a security which basically holds a bunch of stocks or bonds, or an index fund. You can buy ETFs for almost any industry: Telecoms, Tech, Biotech, Utilities etc..
For example: S&P 500 Index ETF, SPDR https://us.spdrs.com/en/etf/spdr-sp-500-etf-SPY?fundSeoName=spdr-sp-500-etf-SPY
So a leveraged ETF uses financial tools (borrowing) to increase the leverage of your bet. You can get *2 or *3 positions which aim to provide 200 % & 300% (respectfully) of the underlying market performance of the asset. If the technology stocks rise 1% and you own a technology ETF *3 then you get a 3% return for the same trade because leverage boosted your returns by 3 times.
For example here is a leveraged Technology ETF: TECL *300 http://www.direxioninvestments.com/products/direxion-daily-technology-bull-3x-etf
Using leverage is more risky. Because the moves up and down are more volatile. Expect swings anywhere between 2%-10+% a day (up or down) depending on market volatility. There are fees involved in owning a leveraged ETF and beta-slippage can cause the ETF to not match the performance of the market over time. If you can handle the risk and are chasing fast returns then a leveraged ETF can be a faster way to grow your wealth.
Comment below & share!